The April to June 2020 quarter started with a standstill in sales, new launches and ongoing construction work, because of the COVID-19 crisis.
A drastic drop in the number of new residential launches and poor sales volume defined the ‘real’ story of residential realty across metro cities in the April to June 2020 quarter. The quarter, in fact, started with a standstill in sales, new launches and ongoing construction work, because of the COVID-19 crisis which disrupted the supply chain of realty raw materials, and led to reverse migration of labourers and fund constraints at developers’ end.
While property sales plummeted by 80% in April and May, YoY, new launches suffered a setback of nearly 75%, as compared to the January-March 2020 quarter, across eight major cities of India. Delhi NCR, Mumbai and Hyderabad saw new launches dipping by 80-95% each, QoQ, according to a report by 99acres.com.
Property sales in the top metro cities amounted to 12,700 units in Apr-Jun 2020, which is a fall of almost 75% as compared to Jan-Mar 2020. Property launches, too, took a hit and stood at its lowest since 2013. However, “the over 90% dip in new launches augurs well for the piling unsold stock, which stands at over six lakh units now and needs about 3.3 years to be disposed of. The affordable housing segment, which holds about 35-40% share in new launches, saw no new supply in the studied quarter,” says Maneesh Upadhyaya, Chief Business Officer, 99acres.com.
The report reveals that cumulatively, the period saw the addition of a mere 1,400 units across cities. The ensuing credit crunch faced by both buyers and developers is expected to shrink housing sales from 4 lakh units in 2019-20 to 2.8 lakh units in 2020-21, across the metro cities. An immediate impact on property prices was not apparent since all metro cities reported status quo in average weighted capital prices, barring Delhi where property rates dipped by a marginal 1%, QoQ.
The pandemic forced the realty sector to undergo a sudden digital transformation as developers shifted to virtual tours and offered discounted schemes to close deals online. The tenant community faced a shift in sentiment in favour of owning a home and the much-rooted-for commercial segment – co-working – felt the need for massive design alterations to meet with social distancing norms. However, with the crisis ripping the industry of a speculated Rs 1 lakh crore by the end of this financial year, these transformations are much required to ensure sustenance.
Impact on Homebuyers & Home Buying Sentiment
With ongoing projects delayed by at least six months, homebuyers expecting possessions received a setback. Job losses and pay cuts affected the paying capacity of homebuyers, who shelved their buying decisions in the wake of market uncertainties and expectations of price cuts. While reduced home loan interest rates from most banks make it
an opportune time to invest in real estate, a large share of prospective homebuyers await more clarity in the ensuing months. The extension of the Credit-Linked Subsidy Scheme (CLSS) under Pradhan Mantri Awas Yojana (PMAY) might be a benefit for those looking for affordable homes. Existing homeowners, however, have welcomed the home loan moratorium of six months announced by the government in April.
The home buying sentiment remained muted during April due to the nationwide lockdown; with enquiries picking up slight pace in June. Genuine homebuyers flocked the market looking for attractive schemes and discounts. NRI demand, too, resurged, with some conversions in the mid-income housing bracket across cities.
Housing sales likely to bounce back
The April-June 2020 quarter forced the realty stakeholders to transform digitally and brainstorm ways to optimise space in both the residential and commercial segments. The massive downfall in economic activities slowed down sales and new launches, and ripped the sector of large investments.
However, housing sales are expected to bounce back as soon as the market reopens completely and homebuyers find their financial footing. Affordable housing is touted to see an upsurge in demand due to a shift in sentiment in favour of home ownership. The commercial real estate segment might take a few quarters to revive; however, it would resurge with a few design changes to meet with social distancing norms. Governmental intervention in the form of fiscal packages for stuck realty projects will come a long way in helping the sector revive from the aftermath of COVID-19.